Trust & Retention account is a combination of multiple accounts or an ecosystem of account which is used to manage the cashflows of an organization which is building/managing a high-value infrastructure project. These infrastructure projects can be Solar power plants, large construction sites, Hydro power plants etc. These projects are usually budgeted at high values. Trust & retention accounts seek to protect the project lenders against the credit risk (the risk of debt service default) by insulating the cash flows of the project company.
The waterfall payment mechanism ensures structured and sequential fund allocation, prioritizing payments based on predefined rules. Widely used in Trust and Retention Accounts (TRA) in India, it streamlines cashflow management for infrastructure projects and debt repayments. Payments are automated based on priorities like taxes, dues, and high-interest debts, enhancing compliance, transparency, and risk mitigation while ensuring budget adherence and operational efficiency.
Parties Involved in TRA accounts arrangement
Project Lender/Sponsor/Financer
These are regulated entities which can be banks, NBFCs, Project finance organizations which are providing finance for such infrastructure related projects.
Borrower/Project Company
This is the entity/organization which is basically the borrower which has taken the credit from project lender to develop the infrastructure projects.
TRA Agent/ Lender’s agent
All the cashflows required to develop/manage this project will be executed from the hands of borrowers by TRA agents. These agents are mandated by Project Lenders
Special Project Vehicle
All these infrastructure projects are executed through a separate company which is created for a special purpose by Project company. Shares of this SPV is held by the sponsors/Lenders of the project.
Secured Trustee
All the transactions initiated are approved by the Secured trustee, which can be an individual members from the Trusteeship company.
Here's why Waterfall Mechanism is a game-changer for in TRA (Trust and Retention Account):
Increased Turn Around Time
Project Companies (SPVs) currently manage all their payments/cashflows with TRA agents in an offline mode which basically increases the TAT required to complete the Payment.
No Real time Payment Tracking
Project companies don’t have visibility on which payments are processed and which of them are still yet to be processed on a real time basis.
Manual reminders for Recurring Payments
If there is a recurring payment, then Project companies need to remind the TRA agent as per frequency of payment release
Delay in Payments
Project companies need to chase Trust agent to release their payments on time which sometime delays the payment.
Manual Payments Between Subaccounts and External Parties
TRA Agents work in an offline setup where they make payments between multiple TRA subaccounts for a borrower and payments to outside parties of the borrower. Multiple payments can make a manual error for payments.
Complex Prioritization and Budget Management
To define the Prioritization of payments based on Amount & Usecase and maintain Budget of Heads of payment, TRA agent need to keep track of all these in an offline manner to manage the cashflow for an infra project.
Manual Management of Standing Instructions
All standing instructions need to be kept in an offline manner to make the respective payment for a project company.
No Unified Cashflow View Across Borrowers
Project lenders don’t have a single view where they can view all the project companies/Borrowers cashflow.
Fragmented Platforms for Payment Processing
TRA agents handle diverse payments like taxes, salaries, and operations, requiring multiple platforms. There's no unified solution to manage or record all transactions.
Lack of Automated Reconciliation Reports
TRA agent don’t have reconciliation report on a merchant level for financial recon activity which is used by Project companies & Lenders.
Accounts Provides a consolidated dashboard to monitor all Master and Sub TRA accounts in real-time, ensuring complete visibility and control.
Automates recurring payments with pre-configured instructions, reducing manual intervention and ensuring timely disbursements.
Enables prioritization of payments based on predefined rules, ensuring structured cash flow management for critical expenses.
Allows setting budgets for different accounts to control spending and avoid overspending.
Supports flexible payment scheduling—daily, weekly, or monthly—tailored to specific project requirements.
Configures retention amounts for specific payments, ensuring funds are allocated for future contingencies or obligations.
Sends alerts for low balances and pending payments, helping prevent defaults and ensuring timely actions
Provides detailed reports and transaction statements in one place, simplifying audits and compliance tracking.
Notifies stakeholders about budget breaches or upcoming payments to maintain financial discipline and accountability.
Offers role-based access control for stakeholders, ensuring secure and restricted access to sensitive financial data.
Allows businesses to define multi-level approvals, enabling better governance and fraud prevention in payment processing
Secured and transperant Fund transfer mechanism
Reduced risk of missing scheduled/priority payments
Notifications to relevant parties on the Payment status & payment approval reminder
Customizable & configurable escrow mechanism in the CASTLER's dashboard
Long standing Partnership with Multi Trustee for ensuring Payment safety
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